Repo moves legal title to your securities during the term, which can trigger a taxable disposition in jurisdictions that tax sales, Lombard loans never transfer ownership and therefore never create that event.
Lombard Loan
A Lombard loan is a secured credit facility where a private bank or custodian lends against a pledged portfolio, typically 50-80% loan-to-value depending on asset quality, while the borrower retains full legal ownership of the collateral. Rates currently sit around SOFR plus 0.5-1.5% for prime clients at Swiss or Liechtenstein private banks, with minimum facility sizes usually starting at $500,000 to $1 million. The borrower keeps dividends, votes, and the economic upside of the pledged assets, and there is no change-of-ownership event, which is the core reason this structure fits the buy-borrow-die strategy. For a fuller comparison of Lombard borrowing against other secured structures, see Lombard Loan vs Margin Loan: Which Borrowing Structure Actually Serves You.
Repo Agreement
A repo (repurchase agreement) is a simultaneous sale and forward repurchase of securities: you sell the asset to the counterparty today and contractually buy it back at a set price on a future date, with the spread representing the implied interest rate. Legal title transfers to the counterparty during the repo term, which means you lose voting rights and dividend treatment differs from a pledge. Overnight repo rates for high-quality government bonds track close to the fed funds rate, often within a few basis points, making repo cheaper in raw rate terms than most Lombard facilities. Institutional desks use repo for short-term liquidity in the hours-to-weeks range, not as a multi-year wealth management tool, and the title transfer creates a taxable event risk in some jurisdictions that Lombard structures avoid entirely.
Things people ask first.
Which structure is cheaper, a Lombard loan or a repo?
Repo is almost always cheaper in raw rate terms, particularly for high-quality government bond collateral where rates track the central bank policy rate closely. Lombard loans carry a spread above benchmark that reflects the bank's credit risk and relationship overhead, typically adding 50-150 basis points for prime clients.
Does a repo agreement trigger a taxable event?
In the United States and most common-law jurisdictions, a repo is structured as a sale and repurchase, so it can constitute a realization event for tax purposes. The IRS has specific rules under IRC Section 1058 that can preserve non-recognition treatment if the repo meets strict conditions, but this requires careful structuring and legal review.
Can an individual use repo the way institutions do?
Practically speaking, no. Repo desks deal in minimum sizes of $1 million to $10 million and require ISDA or GMRA master agreements, clearing relationships, and operational infrastructure that only institutional counterparties or very large family offices maintain. Individual high-net-worth clients access liquidity against securities through Lombard facilities at private banks instead.
What happens to dividends during a repo?
Because legal title transfers in a repo, any dividends paid during the term are received by the counterparty and returned to the original owner as a manufactured payment. That manufactured payment is typically taxed as ordinary income rather than at qualified dividend rates, which is a meaningful cost difference for equity repo compared to a Lombard pledge where the owner receives dividends directly.
Which structure fits the buy-borrow-die strategy better?
Lombard loans are the correct vehicle for buy-borrow-die. The pledge keeps legal ownership intact, the borrower's estate receives the step-up in cost basis at death, and the loan is repaid from estate assets without a realization event during the owner's lifetime. Repo is unsuitable for this purpose because it triggers legal title transfer.
What collateral do Swiss private banks accept for Lombard loans versus repo counterparties?
Swiss and Liechtenstein private banks accept a broad collateral basket including listed equities, investment-grade bonds, fund units, and sometimes concentrated single-stock positions at reduced LTV, often 25-40% for undiversified holdings. Repo desks prefer liquid, standardized collateral such as government bonds and agency securities, and most will not accept concentrated equity positions or fund units at all.
Ready to build the full Lombard borrowing strategy around your portfolio?
The Offshore Playbook walks through exactly how private bank Lombard facilities stack into a buy-borrow-die structure, which jurisdictions offer the cleanest pledge mechanics, and how to negotiate LTV and margin call triggers with your custodian.
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